The Carbon Tax and Climate Change
While Chicago recently went from 37.2 inches of snow (NBC Chicago 2021) to low 50s and sunny within a couple months, humid and sunny Texas saw its first arctic freeze since 1989 (Spectrum Local News 2021). These extreme shifts in weather came as a surprise to residents in these areas, but climate change activists aren’t surprised. Climate change is driven by human emissions of greenhouse gases (NASA 2021), the most prominent greenhouse gas being carbon dioxide. Carbon dioxide is found in every hydrocarbon fuel, which are coal, oil, and natural gases (Investopedia 2020). When these fuels are burned, carbon dioxide is released, which is immensely damaging to the environment and animals. It can cause many health defects, including nausea, dizziness, and long term lung problems (EMedicineHealth 2020).
British economist Arthur Cecil Pigou presented the idea of using taxes in order to reduce pollution issues (NPR 2019) over one hundred years ago. His idea is now part of the framework for the carbon tax. The carbon tax is paid by companies and industries that produce carbon through their operations (Investopedia 2019) in an effort to encourage humans everywhere to reduce their carbon emissions and find more environmentally friendly substitutes such as wind power plants and solar panels (Tax Policy Center 2018).
The First Carbon Tax and its Results
In 1990, Finland became the first country to implement a carbon tax; it started at $1.34 USD per metric ton of carbon dioxide and currently stands at $77 USD per ton (ScienceDirect 2018). Finland’s carbon emissions have fluctuated since then, but they recently had their lowest carbon emission levels since 1995 — 7.8 metric tons per capita in 2015 (World Bank Data 2021). Finland vows to have their carbon emissions lowered 130% below their levels in 1990 by 2050 in order to contribute to the EU for the Paris Agreement (Climate Analytics 2016), meaning that they will reduce more carbon from the atmosphere than they emit.
Shortly after Finland in 1991, the Scandinavian countries Sweden and Norway implemented their own carbon taxes. Norway’s carbon tax started at $51 USD per metric ton (Investopedia 2020). The graph above shows how their carbon emissions by metric ton per capita has fluctuated over time. Recent data from 2016 shows their emissions per capita was 7.84 metric tons, one of the lowest it has ever been since the carbon tax was implemented. Norway is the largest oil producer in Western Europe, as well as the top seven largest petroleum exporters worldwide.
Recent Case Studies:
The carbon tax has been implemented in 25 countries around the world and the results have been overwhelmingly positive (Earth 2020). For example, Britain’s recent greenhouse gas emissions have become their lowest emissions since 1890. The carbon tax resulted in a 93% drop in coal-fired electricity, and a $25 increase in price for each ton (New York Times 2019). The UK’s gas emissions have seen a 6% decrease from 2015, and a 36% decrease since 1990, of carbon dioxide emissions. This is a faster drop than any other developed country.
Canada, which is the 10th largest emitter of greenhouse gases and the second largest producer of hydroelectricity, raised their prices to $30 per ton of carbon. Prime Minister Trudeau pledged to reduce their carbon emissions by 30% by 2030. (Carbon Brief 2019).
The United States has left the responsibility of the carbon tax in the hands of the states. In California, the current tax on carbon emissions per ton is $15 while the Northeastern states (which include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) have the tax per ton at $5 (New York Times 2019). These profits are being used to invest in clean energy alternatives, such as solar panels and nuclear energy.
Downsides to the Carbon Tax:
Almost everything comes with a downside, and the carbon tax comes with a few. To begin with, implementing the carbon tax is politically difficult in the US. While some politicians continue to deny that climate change is even real, others find it to be a serious danger to the planet. Ideologically, conservatives tend to favor fracking and coal mining — ⅔ of the oil and gas industries contributions have gone to Republican candidates and committees (Open Secrets 2020), while Democrats tend to oppose fracking and believe the carbon tax is an efficient way to lower the country’s carbon emissions. Political gridlock in the federal government has deeply affected America’s ability to implement environmental regulations: one example is Republican President Trump’s withdraw from the Paris Agreement in 2017 after President Barack Obama entered it in September 2016. However, partisan politics doesn’t only affect American environmental regulations. Officials in France and Australia were planning to increase their carbon taxes, but it ended up being shelved after major backlash from voters who were criticizing the high energy prices (New York Times 2019).
Additionally, the carbon tax disproportionately impacts lower income households. The increase in prices for household necessities such as gas and electricity result in lower income families having to take a bigger chunk out of their paycheck to spend on fuel and electricity bills (The Balance 2020). Companies increase their prices to make up for the lost profits caused by the carbon tax. Since most cars use gasoline as fuel, it can be expensive to fill up their car tanks. The alternative to gas fueled cars are electric cars (which are relatively new to the car industry and environment friendly) but come with a bigger price — electric cars are about $19,000 more expensive than gasoline run cars (NRDC 2020), so low income families cannot afford them.
Lastly, these higher prices would cut back people’s purchasing powers when it comes to their earnings, which would effectively reduce their real wages. Real wages are the value of wages adjusted for inflation (Economics Help 2017). Lower wages tend to decrease the overall supply of labor. As well as reduction in real wages, investment could decline, which can result in a reduction of the economy’s total output (Congressional Budget Office 2013).
Taking into account all the data provided, it is safe to say that the carbon tax is successful in its job to lower carbon emissions. Countries all over the world have been reverting to safer, environment friendly sources of energy. While there is still work to be done and political processes to navigate, the world is on the right track to fighting climate change.
Works Cited
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